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Ruling

Subject: Deductions - travel expenses

Question:

Are you entitled to a deduction for travel expenses incurred to go to your medical practitioner for treatment?

Answer:

No.

This ruling applies for the following periods

Year ended 30 June 2006

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on

1 July 2005

Relevant facts

You suffered a work related injury and as a result you receive worker's compensation payments.

A condition of receiving the worker's compensation payments was that you were required to supply medical certificates.

You attend your medical practitioner for treatment, to obtain prescriptions and to obtain the worker's compensation forms required by the insurance company.

In attending the medical/hospital appointments, you would travel from home to the hospital or doctor and then return to your home using your own vehicle.

You were reimbursed from the insurance company for this travel based on a per km rate they have established. This rate is lower than the rate used in the cents per km method for claiming a deduction for car expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature or relate to the earning of exempt income.

A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997, it must have the essential character of an outgoing incurred in gaining assessable income (Lunney v. FC of T, Hayley v. FC of T (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166) and there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236).

In Commissioner of Taxation v. Anstis (2010) 241 CLR 443; (2010) 2010 ATC 20-221; (2010) 76 ATR 735 (Anstis), the Court considered the deductibility of expenses incurred by the taxpayer in undertaking her study which was a requirement to her receiving the Youth Allowance. It was found that the reason for the taxpayer incurring the expenses was not determinative of the question whether they were incurred in gaining or producing the youth allowance. The occasion of her study expenses was to be found in what she did to establish and retain her statutory entitlement to the receipts.

Your case can be likened to the Anstis case, in that you are required to fulfil certain requirements, namely continue to go to your medical practitioner and the hospital to obtain treatment. As such, it can be said that the expenses for the doctor are expenses incurred to establish and retain your worker's compensation payments.

However, travel to the place of study was not specifically considered in the Anstis case and if it were, the issue of whether or not the travel could be considered to be private in nature would need to have been addressed to determine its deductibility.

The Commissioner's view, as stated in Taxation Ruling IT 2199, is that the expenses incurred in travelling from home to work are not deductible as they are outgoings of a private nature. The High Court has stated in relation to 'home to work' travel: '...it may be said to be a necessary consequence of living in one place and working in another...' (per Williams, Kitto and Taylor JJ in Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478 at 501; (1958) 11 ATD 404 at 414).

Travel undertaken to receive medical treatment for a work-related injury was discussed in Rossitto v. FC of T 98 ATC 2093 (Rossitto). In this case, the taxpayer severely damaged his knee in a work-related injury and liability was accepted for compensation. The taxpayer argued that the cost of regular travel by motor vehicle to his doctor, physiotherapy treatment and specialist doctors was necessarily incurred in deriving the compensation income. He further argued that the payment of compensation was conditional on the maintenance of a rehabilitation program.

However, the claim for travel costs failed as they did not have the required nexus with the derivation of assessable income and were found to be of a private or domestic nature. It was difficult to separate the private and personal nature of medical treatment and its relationship with the derivation of income. The case concluded that, in the same way as travelling to a place of employment is not deductible, travel to receive medical treatment, even if it could be said that such medical treatment is a prerequisite to earning income is equally non-deductible.

In your case, you were required to go to your medical practitioner for treatment in order to continue getting your worker's compensation payments.

As highlighted in the Rossitto case, the cost of travel to receive medical treatment is considered private in nature and not deductible. Accordingly, you are not entitled to a deduction for the travel expenses incurred to go to your medical practitioner for treatment.